Tags: Pimco | El-Erian | Banks

Pimco’s El-Erian: Banks Are Entering a New Era

Friday, 09 Dec 2011 07:58 AM

Pimco CEO Mohamed El-Erian says the nature of banks has changed for the foreseeable future, and perhaps forever as they shift from so-called casino banking to a much more utilitarian format.

“Look for Western banks to be less complex, less global, somewhat less inter-connected and, therefore, less systemic,” he said, in a note to investors, The Globe and Mail reports.

“Also, with the Western banking system shrinking in scope and scale, look for new credit pipes to be built around those that are now clogged. With the aim of supporting growth and jobs, particularly in longer-term investments such as infrastructure, some of these pipes will be directed or enabled by governments,” he wrote.
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“Banks will be in a better position to serve the real economy without exposing it to catastrophic risk and harmful abuses," El-Erian wrote.

MohamedEl-Erian200ap-.jpg
Mohamed El-Erian
(Associated Press photo)
Reuters reports that U.S. banks want regulators to give them more time to liquidate investments in certain private equity funds under the Volcker rule, arguing that without more leeway they will have to hold "fire sales."

Some banks fear that funds with a longer time horizon, such as those tied to real estate, will take longer than the general timeframe of five years laid out in the Volcker rule to sell the assets at decent prices.

The Volcker rule, a part of the 2010 Dodd-Frank financial oversight law that tries to make the financial system safer, greatly restricts the amount banks can invest in hedge and private equity funds.

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Pimco CEO Mohamed El-Erian says the nature of banks has changed for the foreseeable future, and perhaps forever as they shift from so-called casino banking to a much more utilitarian format. Look for Western banks to be less complex, less global, somewhat less...
Pimco,El-Erian,Banks
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2011-58-09
Friday, 09 Dec 2011 07:58 AM
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